4 Key Matters to Consider During the Contract Bidding Process
- Jul 17, 2023
- Edward Opall
Many contractors enjoy working on projects with long-term clients and negotiating contracts collaboratively. There’s often a lengthy pre-construction engagement where the contractor engages in value engineering to fine-tune the scope to get an optimal result for the client. Other contractors focus on projects won in a hard-bid environment, where contractors compete to provide the lowest qualified bid. But even contractors who typically negotiate with clients will seek hard-bid opportunities as a core element of their business. The bidding process requires time and money, and winning these projects involves assuming significant risk. Focusing on the projects and clients that align with your company's strategic objectives is essential. Here are a few questions to ask when pursuing a project to bid.
Does the opportunity align with our strengths, experience and strategic vision?
Companies often get in trouble when trying to reach beyond their expertise. Organizations with significant commercial experience may not fare as well handling residential, institutional or government projects. Without the appropriate technical expertise and knowledge, you may assume more economic and reputational risk than warranted. Sometimes there is a strategic reason to pursue a bid outside your typical expertise, but you should consider that decision carefully.
What do we know about the client?
Looking at a potential client's reputation in the business community is important. If you're contemplating working on a project for a developer but find they have a reputation for being unreasonably difficult, litigious, undercapitalized or simply inexperienced, you may want to reconsider.
How deeply have we evaluated the project and design documents to identify risks, and are the budgets properly developed?
Some typical examples of areas where projected costs in the budgets developed in a bid have gone wrong:
- The project is located outside of the region where the contractor has deep market intelligence or a strong business network
- Bidding with incomplete or poorly developed design documents
- Specialized material or equipment with long lead times and few alternative suppliers
- Requirements to use certain subcontractors as a condition of accepting the project
- Meeting prevailing wage requirements and mandated minority or disadvantaged businesses targets
- Challenging site conditions with inadequate staging areas
- Project localities that make development and construction projects extra difficult Insufficient general conditions budget
- Onerous timeframe to start and complete
Is an experienced construction attorney helping us review our contracts?
Assuming you have evaluated all the business risks associated with the project and win the bid, you will need an attorney experienced in construction to help you with the contract language. A lawyer who specializes in the construction industry can help you negotiate finer points in a contract that a general business attorney may overlook. Solid legal counsel will prevent future headaches and help you achieve the best results possible.
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Edward Opall is an Attest Partner in the firm’s Real Estate and Construction Services Group. His practice consists mainly of private company real estate developers, investors, and fund sponsors as well as homebuilders and construction industry clients. Ed also advises numerous clients on operational and accounting process reviews, general business consulting, and income tax planning.
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